Cultural nuances imperative to conducting business with China

The growing Chinese economy has created many opportunities for global organisations. However, the most promising deal can be compromised by misunderstanding and unintentional offence. Norton

The growing Chinese economy has created many opportunities for global organisations. However, the most promising deal can be compromised by misunderstanding and unintentional offence. Norton Rose Senior Associate Erin Brown provides a list of the do's and don'ts when conducting business with China.

Tapping into China's burgeoning economy has become a key component of the business strategy for many progressive Western companies. Although commercial negotiations with Chinese enterprises have become an integral part of Western business ventures, the Chinese market is not as open to foreign negotiation as it was in the 1990's and early 2000's. The government's focus seems to have shifted, with the maturity of its business sectors, to cultivate national industry through policies that favour local companies. In this climate, it is critical when entering into commercial negotiations with Chinese enterprises to have an appreciation of the cultural nuances, business etiquette and expectations that permeate business dealings, to maximise the benefit of an arranged meeting and establish successful business relations with China.

Key Concepts: Guanxi, Respect, Status and Face

These four interrelated concepts underlie Chinese culture and dictate the rules of relationships, both business and personal.

Guanxi can be simply translated as 'relationship', and describes the emphasis placed in Chinese culture on the development of trust and rapport. Business is not undertaken in an impersonal, purely contractual basis in China. In the absence of a legal system that provides transparent independent legal remedies, it is imperative that you have a deeper understanding of your potential business partner's position. Gaining an introduction through a third party contact or referral can be instrumental in developing guanxi.

Respect is a vital part of Chinese culture, and showing respect is central to all relationships. Chinese people have a strong generational hierarchy, which also transpires into a strong respect for commercial and organisational hierarchy. Great respect and honour is shown to those who have reached advanced age. Respect is also gained through achieving success and gaining status.

Status is another key consideration as it influences the way in which Chinese people interact with others. It is important for Chinese business people to understand your status or seniority. This should always be clearly enunciated. In addressing or introducing acquaintances, it is appropriate to refer to the individual's title, such as chairman or director, and begin introductions with reference to the most senior or highly ranked person first.

Familiarity with the concept of "face" will assist greatly in comprehending Chinese behaviours. "Face" is a multifaceted word, generally referring to one's reputation, honour and the impression one's actions give others. Preservation of face is of primary importance and accounts for many aspects of relational interaction. Face is lost, among other ways, through the exposure of poor conduct or inadequacy and through being shown disrespect. Face is gained through the receipt of respect and compliments from others directly or via a third party.

Demeanour

Displays of emotion are not common in Chinese culture. Chinese people pride themselves on decorum and maintenance of composure. It is expected that interactions will be formal and to do so shows respect. It is not appropriate to be prematurely informal, and attempts at jocularity and humour may not be appreciated. Similarly, one should respect personal space and refrain from engaging in physical contact. Introductions should be acknowledged with a light handshake or nod of the head. Overly firm or vigorous handshakes can be construed as aggressive.

Exchange of Business cards

The exchange of business cards is very important in Chinse culture, as it is a way of demonstrating status. Business cards should have your position or title clearly stated and it is a good idea to have the reverse side of the card translated into Chinese. Business cards should be proffered with both hands and with the Chinese translation facing upwards. Others' business cards should also be received with both hands, and should be carefully perused on receipt. Placing business cards away immediately without reading them is a sign of disrespect. It is best to put them into a card case rather than directly into your pocket.

Meetings

Punctuality is a key sign of respect and is highly valued. Endeavour to always be early for meetings as they will generally start promptly. It is very important to wait for your host to welcome you. His welcome speech may be long and it is very rude to interrupt. Your host will generally signal when he is finished and ideally, you will then respond in a complimentary way to your host's remarks.

Business dealings in China often continue over a meal. Taking part in culinary rituals is another way of building the trust and rapport that is essential to successful business relations. The pace is unhurried and negotiations begin after a period of small talk. In making small talk it is essential that certain taboo topics are avoided. Steer clear of political discussion, particularly current government policies and leadership. Negotiations often take place simultaneously with the food being served and eaten. During meals, it is impolite to begin eating or drinking until your host has done so. You should try everything that is offered to you but eat modest quantities.

Seating arrangements for a Chinese business meal are predetermined in accordance with personal importance, reflecting the focus on status and seniority. The most important guest will occupy the seat of honour, facing the entrance or the most easterly position, and others will be seated according to seniority beginning with the seat to the left of the place of honour and then the right and so on, until the least important guests meet in the middle on the opposite side, nearest the entrance. This is a very important aspect of a formal meal and can be used to demonstrate respect for the other party by offering a favourable seating position.

Negotiation Style

Chinese business people are renowned for being shrewd and tenacious negotiators whilst being unfailingly polite. It can be quite difficult to adjust to their negotiation style. Ensure you enter a negotiation with a clear strategy and knowledge of what you are willing to concede. It is becoming increasingly common for negotiations to take place in Mandarin, and therefore, it is essential that you engage a translator with the relevant technical knowledge to eliminate the risk of misinterpretation. Negotiation can take considerable time and be punctuated by significant pauses. Be patient and resist the urge to speak to fill gaps in the conversation. Displays of frustration and impatience give a poor impression and are considered unprofessional. Successful negotiation requires a delicate balance of determination and diplomacy.

In short

Diligent research into the strengths, weaknesses and unique characteristics of a potential business associate should be routine when entering any negotiation. As Chinese cultural nuances are so intrinsically linked to business behaviour and expectations, gaining an appreciation of them should be a routine part of the due diligence process. The scope of the features that distinguish Chinese business culture and etiquette from our own may seem daunting. However, mastering just a few of the examples of Chinese business protocols mentioned above will go a long way towards minimising cross cultural challenges and optimising your potential when doing business with China.

Lawyers Weekly is the leading authoritative source of independent news, analysis and opinion about the business of law in Australia. It includes expert opinion pieces, analysis of the issues impacting on the business of firms, broader geographic coverage of events and issues, regular technology reports as well as regular training & education reports.